L-3 Communications to sell government services unit for $550 million

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(Reuters) - L-3 Communications Holdings Inc (LLL.N) said it would sell its government services division, National Security Solutions, to smaller defense contractor CACI International Inc (CACI.N) for $550 million in cash.

The sale is expected to close in the first quarter of 2016, the company said in a press release.

L-3 and CACI finalized the terms of the agreement early Tuesday morning, aided by strong ties between Chris Kubasik, L-3’s chief operating officer, and Ken Asbury, chief executive officer of CACI. Both used to work for Lockheed Martin Corp (LMT.N).

CACI is also looking at acquiring the information systems and government services business of Lockheed, which last week said it was delaying decisions about that business until the first quarter of 2016.

“L-3 is in the midst of a business transformation aimed at reshaping our portfolio, strengthening our focus on markets where we have leading positions, and improving our top-line growth and margin profile,” Michael Strianese, L-3’s chairman and chief executive officer, said in the press release.

Strianese said L-3 was still looking at more possible steps to improve its portfolio.

CACI’s Asbury told Reuters in an interview that National Security Solutions will position CACI to pursue larger contracts and expand its relationships with the U.S. Department of Defense, intelligence and national security agencies. The federal government is slowly but steadily adopting next solutions including, cloud computing, mobile security and big data analytics, Asbury added.

L-3 is the latest military technology company to shed its less-profitable government consultancy operations in response to lower U.S. military spending.

L-3, the Pentagon’s No. 7 prime contractor last year, has been trying to move away from low-margin businesses and focus on the communications and defense electronics markets.

NSS sells a wide range of services to businesses, government and intelligence agencies. Recently, NSS was awarded a contract to provide comprehensive training to Royal Saudi Air Force operations personnel.